Seeking Advice for Picking a First Credit Card

Grazz989 on 07/07/2021 - 18:04
Last edited 07/07/2021 - 19:21 by 1 other user

Hi all,

I'm trying to decide on my first credit card to apply for.

I've never had any debt (aside from a current HECS if that counts) and as far as I'm aware I don't even have a credit rating yet (I've been waiting a week for Equifax to get back to me on that one).

I've got about $30,000 saved in cash and earn $80,000 base salary from a steady public service job, almost $100,000 factoring in frequent overtime.

Ideally, I would like to foster a good credit score for e.g. buying a house in several years time, but also score some sweet Cashback/points rewards by churning in the meantime (using those 'spend X in y days' deals). While my expenditures are modest, I also have the option of boosting them on paper by putting through my parents qualifying purchases (I trust them 100% to pay me back promptly, nor would I care even if they didn't).

Any recommendations on a first card? I'm aware that simply applying for a high end platinum card is unlikely to be approved simply due to a lack of rating.

Financial Credit Card

Comments

  • Saul Goodman on 07/07/2021 - 18:16
    +1

    You want one which allows a low credit limit, $1-$2k would be best. Do you travel much or buy things from overseas in USD?

    • Grazz989 on 07/07/2021 - 18:18

      I agree, but it would seem that none of the low credit limit cards offer the 'spend X in y days, get cashback/giftcards etc' deals. If someone can recommend one, that's be sweet though.

      I don't travel much at all, but I do buy small value (say, $200/Mo) stuff in USD online, yes.

    • CheeseBeans on 07/07/2021 - 18:55

      Ehh, maybe. IMO, you shouldn't be applying for credit unless:

      1) you absolutely have to
      2) you don't need it, and you're well in control of your spending and finances

      HECS debt does not count as a credit debt, but does count as a obligation for larger credit applications such as mortgages

      Increased expenditure on cards previously does not improve home loan viability, slightly hurts it if anything

      Previously Australia had limited to nil "positive reporting", however now any regular repayment of credit cards or debt contributes positively to your credit score.

      I would pick a card with decent points reward (50-100000), small annual fee or highly subsidised annual fee ($100 or so). For reference 100k FF points will get you $400-500 useful gift cards (coles, woolworths). I usually want to at minimum triple what I get back in gift cards compared to any annual fee or charges.

      Obviously, do not pay interest.

      With $80k in base salary, low outgoings and decent savings with presumably a stable job most credit cards are options for you. That being said, don't be dumb, and if you don't trust yourself, limit the potential damage you can do…

      Most credit cards I consider to be "worth it" tend to have minimum limit of 5k+

      • Grazz989 on 07/07/2021 - 20:06

        Your line of thinking is quite in line with mine. Those cashbacks and gift cards seem really attractive for something that costs me nothing and builds my credit rating (I hope it works that way!).

        For example, the ANZ black card looks very attractive, but it has a $15k min, which I can only presume would exclude me. I could go for it's smaller version, but then I lock myself out of the black for a year after I'm done with the platinum.

        • Autonomic on 08/07/2021 - 10:29

          Just apply for the ANZ black. There's no salary requirement but it used to be $75k. The big 4 and Amex are more lenient when it comes to giving out credit cards, compared to Citi or HSBC for example.

        • endolphin on 09/07/2021 - 08:15

          My advice is that you are being impatient. I agree with your logic to not go for the black card first up. Go for the platinums first ($6k), and if that all goes smoothly you can move on to the blacks next year (and every year).

  • brokenglish on 07/07/2021 - 18:17
    +1

    simply applying for a high end platinum card is unlikely to be approved simply due to a lack of rating.

    You never know until you try. First time credit card owner? I think banks will like you.

    I usually have 2 in my arsenal: Amex Platinum Edge and HSBC Platinum.
    HSBC is for when Amex is not accepted.
    Thinking to downgrade the Amex to Essential for no fee.

    The 3rd card is on rotation, if there’s a good deal (cashback/points), I’ll grab it.
    See the guide here: https://www.ozbargain.com.au/wiki/credit_card_guide

    I personally don’t have any plan to borrow a large sum in the future so I don’t care about credit rating and 💩.
    If one day I need to borrow money and that’s all they offer me then that’s all it is. If the sum is not enough I simply need to save more.

    • Grazz989 on 07/07/2021 - 18:20

      Hmm. But doesn't getting declined ding your rating? I'd hate to apply for a card and the first thing on my record is a penalty …

      • brokenglish on 07/07/2021 - 18:23
        +1

        Nah, ratings fear me mate 😂 I’ve never been declined before. And I’ve churned like 10+ credit cards. I’m pretty sure this is rookie number.

        If you’re scared to ding your rating then don’t apply for credit card.

    • CheeseBeans on 07/07/2021 - 18:56

      My first CC was a 15k min limit black card. They gave it to me without hesitation.

  • brad1-8tsi on 07/07/2021 - 19:06
    +1

    A credit score is a minor criteria to get a mortgage in Australia. The main criteria is a savings record and ability to pay back the loan.

    If you really want a CC a Coles No Fee Mastercard is a good starting point. Pay it off every month.

  • oscargamer on 07/07/2021 - 19:16

    Just pay it off every single month. Whatever you get.

  • mickyb80 on 07/07/2021 - 19:23
    +1

    I'll make an assumption. You're quite young (early 20's)?

    Sounds like you would be best with a low rate card.
    Depending on other requirements you have - e.g. purchases OS, travelling (normally) or the likes?

    For your first, I'd recommend you make sure you research, which it sounds like you are doing. Make sure to only apply for 1x as your credit rating will reduce when you apply, and by applying for various cards you will have it listed on your credit file. (Note: Equifax is not the only agency in AU. there is 3 - Experian, Equifax and Iillion).

    Unless you really 'need' or will 'use' benefits, don't bother:

    I'd not worry too much about the rewards programs, because you do pay for them in your annual fee and interest (if you don't pay the total of the monthly balance) etc. They are really not worth much anymore (I've got tens of millions of points and they are not worth much at all in dollar terms when you think about the conversion rate nowadays).

    Forget about the status (black, platinum, gold etc.) cards. Again, you pay for the benefits within the annual fees. So unless you will truly use Airport lounges, etc. don't bother. I use my frequent flyer partner airlines 99% of the time. Maybe once a year I'll use the Amex or Priority lounge network. Not worth it.

    Start with something basic, get a good credit history and when you are earning a bit more coin, then look to a premium card. As you get older, you will most likely find yourself a good travel agent who will manage things for you and provide better offers than you will get with a pretty coloured bit of plastic. You will find your home insurance will cover your mobile if you take personal item cover etc. The travel insurance is usually included with most cards, but providers like Chubb are 3@star)5 to deal with if you need to make a claim. Allianz isn't bad, but how much travel are you likely to do at the best of times, let alone in the next 2 yrs with COVID?

    Stay with a good, local (AU) banking provider. Those like CitiBank are pretty average when it comes to customer service (lack thereof). Amex is at times painful as well. Check who the issuing provider is (e.g. what brand the card is - Coles is issued by Citi from memory, Virgin is Amex or Westpac etc). Best to go direct with a bank that's local in my opinion like WBC, ANZ, CBA, NAB. That way you know who you are dealing with and can usually get a direct and better level of service.

    Check with the current banking provider you have also and see if they can offer you something basic, as a start and perhaps throw in a free annual fee and/or promo of sorts if you have banked with them for a long time.

    MasterCard and Visa are the two you will probably want to look at. Still too many fees with Amex.

    If you not familiar, and do look at Amex, if you don't already know the difference, stay away from a charge card, this is not a credit card. Amex and Diners were both originally charge cards. Amex now offers both formats. You don't want a charge card for your first!

    Hope this helps!

    BTW - chat with a financial advisor….

    • Grazz989 on 07/07/2021 - 20:02
      +1

      Many thanks for such a thorough response.

      Mid-20's, very close. Why would a low rate card be preferable? My intention is to pay off in full every month - which should be very within my ability.

      I'm not interested in status at all, or even holding onto cards with high annual fees. I guess I'm just keen to take advantage of these cashback in 90 days (sometimes + no annual fee first year) offers and then ditch for the next one not long after the 90 day promotional period. That way I can get hundreds in cash backs, plus build a credit rating - that's the idea anyway! Travel doesn't interest me haha.

      • mickyb80 on 08/07/2021 - 13:48
        +1

        Hey mate,

        No problems at all.
        If you believe you are good to go with ensuring the payment at the end of each month, then you should be good to go.
        Just keep in mind, most of the offers come with premium cards, which means the value of your credit limit will be listed on your credit file also.

        Remember, each time you 'churn' your card, the application will remain on your credit file for 5 years (each application).

        Each time you apply for credit, it is taken into account. Therefore the more you apply for, it's generally taken into consideration by the next provider and you can be seen as a 'credit shopper' if you like (for lack of a better word).

        Therefore, if you going to look at a home loan in 2 years time, and have applied for, say, 4x credit cards over the previous 2 yrs and closed the accounts after a 90 day period or the likes, then this will most likely have a negative impact on your ability to borrow in future. the 4x applications will remain and have reduced your credit score. (If that makes sense).

        If the main purpose of this practice is to build a credit rating, then I'd say, just stick with a low rate card with a small credit value of a few grand.

        Hope this helps…

        • endolphin on 09/07/2021 - 08:11
          -2

          For me, 30+ credit cards in 3 years had no negative impact on a recent mortgage refinance.

  • rektrading on 07/07/2021 - 19:26
    -3

    Building a credit score is overrated.

    I purposely destroyed my score so that I can never get a loan again from a traditional financial institution. This was the second-best financial decision I've ever made.

    Does this prevent me from borrowing money? No. People can now use assets as collateral to borrow 10000s, 100000s, or even millions without a credit score. I can use my desktop or mobile device and borrow any amount I want (limited only by the collateral) for any purpose at an interest rate of <1% from the bank of DeFi.

    A new future of finance is coming. Be part of it or be left behind. Your choice.

    • Grazz989 on 07/07/2021 - 19:54
      +1

      How did intentionally destroying it benefit you?

      • rektrading on 08/07/2021 - 17:53

        Burning bridges to things one no longer need or want is a liberating feeling.

        Credit scores are one of the tools used by the haves to control have-nots. For some people, credit scores are a thing of the past. It's now possible to borrow money using technology and not be subjected to invasive credit checks.

        No applications to fill out, no rejections and no limits. Lending and borrowing in a permissionless way is the new future of finance.

  • Randxyz123 on 07/07/2021 - 19:49

    This(https://www.pointhacks.com.au/credit-cards/qantas-american-e…) is probably one of the better ones going around. 90K bonus and a rebate on the annual fee if you meet the conditions.

    In Australia getting a credit score to buy a house etc isn’t important. In the US it is important. A lot of financial videos talk about it because in other countries it is important.

    I’d usually agree that Amex is not a good one to start on and offers little value in a no travel world but the above deal is pretty decent.

  • donga100 on 07/07/2021 - 20:11

    If you are looking to take advantage of cashback and signup offers, go right ahead. If you are primarily interested in improving your credit score though you should probably not apply for any cards at all. According to Canstar, one application for a credit card is not likely to hurt your score, but making multiple applications in a short period of time could and the more credit you have, the more it will affect (and potentially reduce) your credit score.

    In America the credit score system works differently which is why some people have heard different stories. Dishonest bank staff may also tell you things like this because they have targets/commission based on signing people up for credit cards.

    • Grazz989 on 07/07/2021 - 20:15

      What qualifies as a short period though?

      I'd be applying for one card, using it for a few months, then closing it and only then applying for the next. Surely that wouldn't fall into the desperation for credit concept canstar is talking about …

      • cuy on 07/07/2021 - 20:37
        +2

        It definitely would. You have no credit history. For someone new with next to no credit history, churning every few months does not look good at all from a credit rating point of view.

        But it sounds like you're already determined/leaning towards (destroying) churning.

        One advice I can give you is make sure you sign up to GetCreditScore/CreditSavvy a few weeks after your first credit card to keep an eye on your credit rating/history. Then when you churn to your subsequent cards, monitor the impact on your credit rating and make sure you're not to get too low. I've heard stories where people get rejected signing up to postpaid services due to it.

        What I've done was open a credit card account with no fee's (mine is min $6K credit limit) and never spent anything on it (credit rating low 500s), until I had proper income. By that time my credit rating was high 900's so started the churn then. To this day I have not closed that credit card and have a long standing credit history from it. My rating bounces between 800-900s (2 cards per year, last credit card took 70 points off).

        Strange thing is that the each time I beat my previous total debt limit, my credit rating shoots up. Housing loan, $15K min limit, all push my ratings up, but churning often reduces it. On the low side I lose 25 points if I have not applied in a while 6+ months), if I apply the month after I close a credit card, it ranges between 50 to 100.

        • Grazz989 on 08/07/2021 - 01:22
          -1

          I don't understand how voluntarily quitting credit cards and keeping a total credit limit low counts as 'desperation for credit'. That term implies someone that's applied for many cards in a row, desperate for getting as much credit as possible, and/or desperate enough to apply many times to at least get some credit.

          That doesn't seem to fit the churning pattern of voluntarily giving up credit and only then applying for one card, say every 4-6 months or so.

          I'm surprised to hear that you're saying that churning damages your rating given that in every churning thread I've seen, everyone says otherwise …

          • cuy on 08/07/2021 - 07:54
            +2

            @Grazz989: Look, it sounds like youve made up your mind. Im just stating what ive experienced. No one knows how credit rating works.

            YMMV

            My advice is sign up to GetCreditScore/CreditSavvy and monitor.

            • Grazz989 on 08/07/2021 - 15:40
              -1

              @cuy: Okay, fair enough. I appreciate your time and efforts.

              Just kinda an unfortunate part of how the internet works where everyone on one thread agrees on X, then in the next apparently everyone agrees the opposite.

              Cheers though, definitely will take the monitoring advice if nothing else.

  • FareEvader on 08/07/2021 - 00:22

    CBA credit cards!

  • kev98 on 08/07/2021 - 01:46
    -1

    Get a fee-free credit card with lowest possible limit.

    I used to be a fan of points cards however since having one for years and being in process of cancelling them, i can tell you they make you spend more money. Chasing points is largely a fools game unless you are super disciplined/you are putting business expenses through it. And while you may be disciplined now, that may change in the future.

    In summary, sign up to a fee-free card with low limit just so a credit file is created and pay for things with a debit card.

  • yayo321 on 08/07/2021 - 23:14

    Everybody gotta start somewhere. While you're waiting for Equifax, another option is that you can download a mobile app called WeMoney (it's free). It will ask for some personal details such as your name, address, license to verify your Identity. I just downloaded the app yesterday and it's pretty straight forward. Once you're signed up, you'll have info about your credit scores from both Experian and Equifax. It will also provide info on the credit cards you have, mortgages or loans you owe and enquiries you've made. I only applied for a mortgage maybe 4 years ago. Never used credit card before until around mid last year and it's my fifth one now but recently just cancelled one.

    I have applied for those cards last month (had to make some expenses) and i had no issues. Got approval within a few days.
    https://www.ozbargain.com.au/node/614545
    https://www.ozbargain.com.au/node/626191

    I still have an excellent credit score and never missed a payment on my CC or mortgage

    Good luck

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